Liberty Latin America Ltd.
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(a) | Except as otherwise noted, the amounts presented for each C&W jurisdiction include revenue from residential and B2B operations. |
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(b) | The amounts represent wholesale services revenue from various jurisdictions across the Caribbean and Latin America, primarily related to the sale and lease of telecom capacity on C&W’s sub-sea and terrestrial networks. |
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(c) | The amounts relate to a number of countries in which C&W has less significant operations, all but one of which are located in Latin America and the Caribbean. In addition, these amounts include C&W intercompany eliminations. |
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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
See the Glossary of defined terms at the beginning of this Quarterly Report on Form 10-Q.
The following discussion and analysis, which should be read in conjunction with our 2021 Form 10-K and the condensed consolidated financial statements and the discussion and analysisaccompanying notes included in our 2017Part I, Item 1 of this Quarterly Report on Form 10-K,10-Q, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
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• | •Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. •Overview. This section provides a general description of our business and recent events. •Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three and six months ended June 30, 2022 and 2021. • This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. |
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• | Overview. This section provides a general description of our business and recent events.
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• | Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three months ended March 31, 2018 and 2017.
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• | Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments. |
The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Latin America or collectively to Liberty Latin America and its subsidiaries.
Unless otherwise indicated, convenience translations into U.S. dollars are calculatedoperational data (including subscriber statistics) is presented as of March 31, 2018.June 30, 2022.
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report on Form 10-Q are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 3. Quantitative and Qualitative Disclosures About Market Risk,and Item 4. Controls and Procedures may contain forward-looking statements, including statements regarding: our business, product,products, foreign currency and finance strategies in 2018; the anticipated rate and cost of our recovery in certain markets from the impact of Hurricanes Maria and Irma; our property and equipment additions in 2018;strategies; subscriber growth and retention rates; changes in competitive, regulatory and economic factors; anticipated changes in our revenue, expenses, or growth rates; debt levels; our liquidity and our ability to access the liquidity of our subsidiaries; credit risks; internal control over financial reporting and the remediation of material weaknesses; foreign currency risks; interest rate risks; compliance with debt, financial and other covenants; our projected sources and uses of cash; the Telefónica Costa Rica Acquisition; the Claro Panama Acquisition; the timing and impacts of proposed transactions; anticipated changestransactions, including the pending formation of the Chile JV; the effects and potential impacts of COVID-19 on our business and results of operations; reductions in operating and capital costs; our revenue, costs or growth rates; our liquidity; credit risks; foreign currency risks; target leverage levels; our future projected contractual commitments2022 Share Repurchase Program; the outcome and cash flows;impact of pending litigation; and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In evaluating these statements, you should consideraddition to the risks and uncertainties discussedrisk factors described in Part I, Item 1A in our 20172021 Form 10-K, as well as the following list ofare some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
•economic and business conditions and industry trends in the countries in which we operate;
•the competitive environment in the industries in the countries in which we operate, including competitor responses to our products and services;
•fluctuations in currency exchange rates, inflation rates and interest rates;
•our relationships with third-party programming providers and broadcasters, some of which are also offering content directly to consumers, and our ability to maintain access to desirable programming on acceptable economic terms;
•our relationships with suppliers and licensors and the ability to maintain equipment, software and certain services;
•instability in global financial markets, including sovereign debt issues and related fiscal reforms;
•our ability to obtain additional financing and generate sufficient cash to meet our debt obligations;
•the impact of restrictions contained in certain of our subsidiaries’ debt instruments;
•consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
•changes in consumer television viewing preferences and habits;habits, including on mobile devices that function on various operating systems and specifications, limited bandwidth, and different processing power and screen sizes;
•customer acceptance of our existing service offerings, including our video, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
•our ability to manage rapid technological changes;
•the impact of 5G and wireless technologies on broadband internet;
•our ability to maintain or increase the number of subscriptions to our video, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;household and mobile subscriber;
•our ability to provide satisfactory customer service, including support for new and evolving products and services;
•our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
•the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
•changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings;
•government intervention that requires opening our broadband distribution networks to competitors;
•our ability to renew necessary regulatory licenses, concessions or other operating agreements and to otherwise acquire future spectrum or other licenses that we need to offer new mobile data or other technologies or services;
•our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions;acquisitions, such as with respect to the pending formation of the Chile JV;
•our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from and implement our business plan with respect to the businesses we have acquired or that we expect to acquire;acquire, such as with respect to the pending formation of the Chile JV, the Claro Panama Acquisition and the Telefónica Costa Rica Acquisition;
•changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.S. or in other countries in which we operate and the results of any tax audits or our affiliates operate;tax disputes;
•changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks;
•the ability of suppliers and vendors, including third-party channel providers and broadcasters (including our third-party wireless network providersprovider under our MVNO arrangement), to timely deliver quality products, equipment, software, services and access;
•the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;
•uncertainties inherent in the development and integration of new business lines and business strategies;
•our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with our network extension and upgrade programs;
•the availability of capital for the acquisition and/or development of telecommunications networks and services;services, including property and equipment additions;
certain factors outside of our control that may impact the timing and extent of the restoration of our networks and services in Puerto Rico and certain of our C&W markets following Hurricanes Irma and Maria;
•problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;acquire, such as with respect to the AT&T Acquired Entities and with respect to the Telefónica Costa Rica Acquisition and the Claro Panama Acquisition;
•the effect of any of the identified material weaknesses in our internal control over financial reporting;
•piracy, targeted vandalism against our networks, and cybersecurity threats or other security breaches, including the leakage of sensitive customer data;data, which could harm our business or reputation;
•the outcome of any pending or threatened litigation;
•the loss of key employees and the availability of qualified personnel;
•the effect of any strikes, work stoppages or other industrial actions that could affect our operations;
•changes in the nature of key strategic relationships with partners and joint venturers;
•our equity capital structure;
•our ability to realize the full value of our intangible assets;
•changes in and compliance with applicable data privacy laws, rules, and regulations;
•our ability to recoup insurance reimbursements and settlements from third-party providers;
•our ability to comply with economic and trade sanctions laws, such as the U.S. Treasury Department’s Office of Foreign Assets Control;
•the impacts of climate change such as rising sea levels or increasing frequency and intensity of certain weather phenomena; and
•events that are outside of our control, such as political conditions and unrest in international markets, terrorist attacks, malicious human acts, hurricanes, volcanoes and other natural disasters, pandemics, including the COVID-19 pandemic, and other similar events.
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report on Form 10-Q are subject to a significant degree of risk. These forward-looking statements and the above described risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q,, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are an international provider of video, broadband internet, fixed-line telephonyfixed, mobile and mobilesubsea telecommunications services. We provide,
A.residential and B2B communications services in (i) 18in:
i.over 20 countries primarily inacross Latin America and the Caribbean through two of our reportable segments, C&W (ii) Chile through VTRCaribbean and (iii) Networks and C&W Panama;
ii.Puerto Rico, through our reportable segment Liberty Puerto Rico.Rico;
iii.Chile, through our reportable segment VTR; and
iv.Costa Rica, through our reportable segment Liberty Costa Rica; and
B.through our Networks & LatAm business of our C&W also providesCaribbean and Networks segment, (i) B2B communication services in certain other countries in Latin America and the Caribbean and (ii) wholesale communication services over its sub-seasubsea and terrestrial fiber optic cable networks that connect overapproximately 40 markets in that region.
Operations
As described below, Hurricanes Irma and Maria caused significant damage to our operations in the Impacted Markets, as defined below, resulting in disruptions to our telecommunications services. As we are still in the process of assessing the operational impacts of the hurricanes in the Impacted Markets, we are unable to accurately estimate our homes passed and subscriber numbers as of March 31, 2018. Accordingly, the March 31, 2018 subscriber numbers for the Impacted Markets reflect subscriber amounts as of August 31, 2017 as adjusted through March 31, 2018 for (i) net voluntary disconnects and (ii) disconnects related to customers whose accounts are delinquent. The Liberty Puerto Rico homes passed reflect the August 31, 2017 levels adjusted for approximately 30,000 homes in geographic areas we may not rebuild.
At March 31, 2018,June 30, 2022, we (i) owned and operated fixed networks that passed 6,457,9008,541,600 homes and served 5,231,000 revenue generating units (RGUs),6,412,200 RGUs comprising 2,146,8002,881,900 broadband internet subscribers, 1,691,7001,929,000 video subscribers and 1,392,5001,601,300 fixed-line telephony subscribers, and (ii) served 3,620,4007,492,300 mobile subscribers.
Acquisition
Claro Panama Acquisition. On September 14, 2021, we entered into a definitive agreement to acquire América Móvil’s operations in Panama in an all-cash transaction based upon an enterprise value of $200 million on a cash- and debt-free basis, for which we completed the closing on July 1, 2022.
Hurricane Impact UpdateCompetition and Management Focus
In September 2017, Hurricanes IrmaWe are experiencing significant competition from other telecommunications operators and Maria impacted a numberother communication service providers in all of our markets, and in the Caribbean, resultingparticular in varying degrees of damage to homes, businesses and infrastructureour operations in these markets. The most extensive damage occurred in Puerto Rico and certain markets within our C&W reportable segment (collectively, the Impacted Markets). WeChile, as competitors continue to remain uncertain asexpand and upgrade their networks. In addition, technological advances and product innovations have increased and are likely to continue to increase giving customers several options for the extentprovision of their communications services. In all markets, we seek to differentiate our communications services by focusing on customer service and ultimate completion of our restorationcompetitive pricing, and reconnection effortsoffering quality high-speed connectivity. For example, in the Impacted Markets.
We maintain an integrated group propertyMarch, VTR introduced new pricing plans for new and business interruption insurance program covering all Impacted Markets up to a limit of $75 million per occurrence, which is generally subject to $15 million per occurrence of self-insurance. Althoughexisting customers. The significant competition we are continuing to assess the alternatives underexperiencing in Chile has adversely impacted our insurance policy, we currently believe that the hurricanes will result in at least two occurrences. This policy is subject to the normal termsrevenue, RGUs and conditions applicable to this type of insurance. We expect that the insurance recovery will only cover a portion of the incurred losses of each of our impacted businesses.
During the three months ended March 31, 2018, we received a net advance payment from our third-party insurance provider of $30 million associated with the initial insurance claims filed in connection with damages sustained from the hurricanes. Until such claims are legally settled, the advance is included in other accrued and current liabilities in our condensed consolidated balance sheet.
Liberty Puerto Rico. In Puerto Rico, the damage caused by Hurricane Maria and, to a lesser extent Hurricane Irma, was extensive and widespread. Individuals and businesses across Puerto Rico continue to deal with significant challenges caused by the severe damage to essential infrastructure, including damage to Puerto Rico’s power supply and transmission system. Similarly, Liberty Puerto Rico’s broadband communications network suffered extensive damage. As of March 31, 2018, we have been able to restore service to approximately 560,000 RGUs of our total estimated 723,100 RGUs at Liberty Puerto Rico. Additionally, we estimate that approximately $130 millionof property and equipment additions will be required to restore nearly all of Liberty Puerto Rico’s broadband communications network, of which approximately $112 million has been incurred following the hurricanesthrough March 31, 2018.
While the negative impacts from the hurricanes are declining as the network is restored and customers are reconnected, we expect that the adverse impacts of the hurricanes on Liberty Puerto Rico’s revenue and Adjusted OIBDA will continue through 2018and beyond. The severity of the hurricanes’ impact on Liberty Puerto Rico’s future revenue and Adjusted OIBDA will be influenced in part by the following uncertainties:
the length of time that it will take to restore Puerto Rico’s power and transmission system and to fully restore our network;
the number of people that will choose to leave Puerto Rico for an extended period or permanently; and
the ability of the Puerto Rico and U.S. governments to effectively oversee the recovery process in Puerto Rico.
In terms of liquidity for Liberty Puerto Rico, the cash provided by its operations was a significant source of pre-hurricane liquidity. As a result of the hurricane impacts, we do not expect Liberty Puerto Rico will generate positive cash from operations, inclusive of capital expenditures, until at least the latter half of 2018. In this regard, Liberty Puerto Rico’s liquidity needs are being funded by the up to $60 million LCPR Equity Commitment from Liberty Latin America and Searchlight, $45 million of which has been provided during 2018, including $20 million subsequent to March 31, 2018, and an insurance advance of $35 million ($30 million through a third-party insurance provider and the remainder through a captive insurance subsidiary). Future liquidity sources are expected to include further insurance proceeds, the remaining portion of the LCPR Equity Commitment, as applicable, through December 31, 2018 of up to $15 million and, cash from operations.ARPU. For additional information regarding the LCPR Equity Commitment, see Material Changes in Financial Condition below. While there are still uncertainties with respect to Liberty Puerto Rico’s recovery from the hurricanes, and no assurance can be given as to the ultimate amount or timingrevenue impact of liquidity to be received from cash from operations or insurance proceeds, we expect these existing and potential sources of liquidity will be sufficient to satisfy Liberty Puerto Rico’s liquidity requirements over the next twelve months.
C&W. C&W offers services over fixed and mobile networks, and portions of these networks in C&W’s Impacted Markets were significantly damaged as a result of the hurricanes. The most notable markets that continue to be impacted are the British Virgin Islands and Dominica. Services to most of our fixed-line customers in these markets have not yet been restored. While mobile services have been largely restored in C&W’s Impacted Markets, we are stillchanges in the process of completing the restoration of our mobile network infrastructure. In addition to network damage, these markets are also dealing with extensive damage to homes, businessesRGUs and essential infrastructure.ARPU, see discussion below.
We currently estimate that approximately $50 million of property and equipment additions will be required to restorenearly all of the damaged networks in C&W’s Impacted Markets, of which approximately $21 millionhas been incurred following the hurricanesthrough March 31, 2018. The negative impacts of the hurricanes are declining as the networks are restored and customers are reconnected, and we do not expect there to be a material impact from hurricanes on C&W’s revenue and Adjusted OIBDA during 2018.
Material Changes in Results of Operations
The comparability of our operating results during the three and six months ended June 30, 2022 and 2021 is affected by acquisitions and FX effects. As we use the term, “organic” changes exclude FX and the impacts of acquisitions, each as further discussed below.
In the following discussion, we quantify the estimated impact of acquisitions (the Acquisition Impact) on our operating results. The Acquisition Impact represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. Accordingly,acquisitions. We acquired (i) Telefónica’s operations in Costa Rica in August 2021 and (ii) 96% of Broadband VI, LLC’s operations in the following discussion, (i)U.S. Virgin Islands effective December 2021. With respect to acquisitions, organic increaseschanges and the calculations of our organic change percentages exclude the operating results of an acquired entity during the first 12 months following the date of acquisition and (ii) the calculation of our organic change percentages exclude the Acquisition Impact of such entity.acquisition.
Changes in foreign currency exchange rates may have a significant impact on our operating results, as VTR, Liberty Costa Rica and certain entities within C&W have functional currencies other than the U.S. dollar. Our primary exposure to foreign currency translation effects (FX) exchange risk during 2018 wasrelates to the Chilean peso. For example, the average FX rate (utilized to translate our condensed consolidated statements of operations) for the U.S. dollar per one Chilean peso as 29.0% of our revenue duringappreciated by 18% and 15% for the three and six months ended March 31, 2018 was derived from VTR, whose functional currency isJune 30, 2022, respectively, as compared to the Chilean peso. In addition, our operating results are impacted by changescorresponding periods in the exchange rates for other local currencies inLatin America and the Caribbean.2021. The impacts to the various components of our results of operations that are attributable to changes in FX are highlighted below. For information concerning our foreign currency risks
and applicable foreign currency exchange rates, see Item 3. Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Rates below.
The amounts presented and discussed below represent 100% of the revenue and Adjusted OIBDAexpenses of each reportable segment and our corporate operations, as further discussed in note 16 to our condensed consolidated financial statements.operations. As we have the ability to control Liberty Puerto Rico and certain subsidiaries of C&W that are not wholly-owned, we include 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of (i) certain subsidiaries of (a) C&W and (b) Liberty Puerto Rico, and certain subsidiaries of C&W(ii) Liberty Costa Rica are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations.
Prior to the Split-Off, Liberty Global allocated a portion of their corporate function costs to us, based primarily on the estimated percentage of time spent by corporate personnel providing services to us. Such costs were not intended to reflect the costs of operating as a standalone public company. Accordingly, our corporate-related SG&A costs have increased significantly during 2018, as compared with 2017, as a result of operating as a standalone company and incurring certain public company-related costs. These costs include executive employee and board of directors expenses; insurance; costs related to the compliance with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002); and costs for financial reporting, tax administration, human resources functions and centralization of certain other corporate functions. These increases in costs are inclusive of costs
that Liberty Global charges us in connection with certain of the Split-Off Agreements, as further described in note 11 to our condensed consolidated financial statements.
We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our reportable segments. Any cost increases that we are not able to pass on to our subscriberscustomers would result in increased pressure on our operating margins.
Consolidated Adjusted OIBDA
On a consolidated basis, Adjusted OIBDA is a non-U.S. GAAP measure. Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. Adjusted OIBDA is also a key factor that is used by our internal decision makers determine how to allocate resources to segments. Our internal decision makers believe Adjusted OIBDA is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different countries in which we operate. We believe our Adjusted OIBDA measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measures may not be directly comparable to similar measures used by other public companies. Adjusted OIBDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income or loss.
A reconciliation of total operating income (loss), the nearest U.S. GAAP measure, to Adjusted OIBDA on a consolidated basis, is presented below.
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| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| in millions |
| | | | | | | |
Operating income (loss) | $ | (350.2) | | | $ | 173.0 | | | $ | (161.9) | | | $ | 354.0 | |
Share-based compensation expense | 31.8 | | | 32.8 | | | 61.8 | | | 55.8 | |
Depreciation and amortization | 213.3 | | | 241.2 | | | 427.4 | | | 484.3 | |
Impairment, restructuring and other operating items, net | 568.6 | | | 17.0 | | | 576.4 | | | 19.2 | |
Consolidated Adjusted OIBDA | $ | 463.5 | | | $ | 464.0 | | | $ | 903.7 | | | $ | 913.3 | |
The following tables set forth organic and non-organic changes in Adjusted OIBDA for the periods indicated:
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| C&W Caribbean and Networks | | C&W Panama | | Liberty Puerto Rico | | VTR | | Liberty Costa Rica | | Corporate | | Intersegment eliminations | | Consolidated |
| in millions |
Adjusted OIBDA for the three months ending: | | | | | | | | | | | | | | | |
June 30, 2021 | $ | 188.1 | | | $ | 45.6 | | | $ | 161.4 | | | $ | 68.7 | | | $ | 12.7 | | | $ | (12.5) | | | $ | — | | | $ | 464.0 | |
Organic changes related to: | | | | | | | | | | | | | | | |
Revenue | 24.0 | | | 8.3 | | | 0.7 | | | (32.6) | | | 0.9 | | | 0.1 | | | (0.4) | | | 1.0 | |
Programming and other direct costs | (2.1) | | | (6.4) | | | (8.9) | | | 6.0 | | | (0.1) | | | — | | | 0.3 | | | (11.2) | |
Other operating costs and expenses | 1.0 | | | (3.1) | | | (4.8) | | | 2.5 | | | (1.2) | | | (0.4) | | | 0.1 | | | (5.9) | |
Non-organic increases (decreases): | | | | | | | | | | | | | | | |
FX | (1.4) | | | — | | | — | | | (6.7) | | | (1.0) | | | — | | | — | | | (9.1) | |
Acquisitions | — | | | — | | | 0.4 | | | — | | | 24.3 | | | — | | | — | | | 24.7 | |
June 30, 2022 | $ | 209.6 | | | $ | 44.4 | | | $ | 148.8 | | | $ | 37.9 | | | $ | 35.6 | | | $ | (12.8) | | | $ | — | | | $ | 463.5 | |
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| C&W Caribbean and Networks | | C&W Panama | | Liberty Puerto Rico | | VTR | | Liberty Costa Rica | | Corporate | | Intersegment eliminations | | Consolidated |
| in millions |
Adjusted OIBDA for the six months ending: | | | | | | | | | | | | | | | |
June 30, 2021 | $ | 369.4 | | | $ | 89.6 | | | $ | 311.3 | | | $ | 139.2 | | | $ | 26.8 | | | $ | (23.0) | | | $ | — | | | $ | 913.3 | |
Organic changes related to: | | | | | | | | | | | | | | | |
Revenue | 46.4 | | | 8.2 | | | 5.8 | | | (52.2) | | | 1.9 | | | 0.3 | | | (1.8) | | | 8.6 | |
Programming and other direct costs | (7.4) | | | (6.7) | | | (13.8) | | | 5.4 | | | — | | | — | | | 0.5 | | | (22.0) | |
Other operating costs and expenses | (2.4) | | | (6.2) | | | (11.1) | | | 4.3 | | | (2.9) | | | (3.9) | | | 1.3 | | | (20.9) | |
Non-organic increases (decreases): | | | | | | | | | | | | | | | |
FX | (3.9) | | | — | | | — | | | (12.3) | | | (1.7) | | | — | | | — | | | (17.9) | |
Acquisitions | — | | | — | | | 0.9 | | | — | | | 41.7 | | | — | | | — | | | 42.6 | |
June 30, 2022 | $ | 402.1 | | | $ | 84.9 | | | $ | 293.1 | | | $ | 84.4 | | | $ | 65.8 | | | $ | (26.6) | | | $ | — | | | $ | 903.7 | |
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Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA margin (Adjusted OIBDA divided by revenue) of each of our reportable segments:
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| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| % |
| | | | | | | |
C&W Caribbean and Networks | 46.1 | | | 43.3 | | | 44.7 | | | 42.8 | |
C&W Panama | 31.4 | | | 34.2 | | | 31.6 | | | 34.4 | |
Liberty Puerto Rico | 40.9 | | | 44.8 | | | 40.0 | | | 43.1 | |
VTR | 25.3 | | | 32.8 | | | 26.3 | | | 33.2 | |
Liberty Costa Rica | 33.0 | | | 35.0 | | | 30.5 | | | 37.0 | |
Adjusted OIBDA margin is impacted by organic changes in revenue, programming and other direct costs of services and other operating costs and expenses, as further discussed below. The decrease in the Adjusted OIBDA margin for VTR is primarily related to a decline in revenue, as further discussed below and in the Overview above. The decrease in the Adjusted OIBDA margin for Liberty Costa Rica is primarily related to the inclusion of the Telefónica Costa Rica operations following the Telefónica Costa Rica Acquisition, which generates lower Adjusted OIBDA margin relative to the legacy operations. Additionally, we incurred $7 million and $12 million of integration costs during the three and six months ended June 30, 2022, respectively, in our Liberty Puerto Rico, Liberty Costa Rica and C&W Panama segments. During the three and six months ended June 30, 2021 we incurred $2 million and $3 million, respectively, in our Liberty Puerto Rico segment.
Revenue
All of our reportable segments derive their revenue primarily from (i) residential broadband communicationsfixed services, including video, broadband internet and fixed-line telephony, services, (ii) with the exception of Liberty Puerto Rico, residential mobile services, and (iii) B2B communications services. For detailed information regarding the composition of our reportable segments, see note 16 to our condensed consolidated financial statements.C&W Caribbean and Networks also provides wholesale communication services over its subsea and terrestrial fiber optic cable networks.
While not specifically discussed in the below explanations of the changes in the revenue, of our reportable segments, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our RGUs and/or average monthly subscription revenue per average fixed RGU or mobile subscriber, as applicable, (ARPU).
ARPU.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of RGUs or mobile subscribers during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (i) changes in prices, (ii) changes in bundling or promotional discounts, (iii) changes in the tier of services selected, (iv) variances in subscriber usage patterns, and (v) the overall mix of fixed and mobile products within a segment during the period. In the following discussion, we discuss ARPU changes in terms of the net impact of the above factors on the ARPU that is derived from our video, broadband internet, fixed-line telephony and mobile products. At Liberty Puerto Rico, variances in revenue during the three months ended March 31, 2018, as compared to the corresponding period in 2017, were significantly impacted by Hurricanes Maria and Irma.
The following table setstables set forth the organic and non-organic changes in revenue by reportable segment: segment for the periods indicated.
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| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
C&W Caribbean and Networks | $ | 454.5 | | | $ | 434.2 | | | $ | 20.3 | | | $ | (3.7) | | | $ | — | | | $ | 24.0 | |
C&W Panama | 141.6 | | | 133.3 | | | 8.3 | | | — | | | — | | | 8.3 | |
Liberty Puerto Rico | 364.1 | | | 360.4 | | | 3.7 | | | — | | | 3.0 | | | 0.7 | |
VTR | 150.0 | | | 209.3 | | | (59.3) | | | (26.7) | | | — | | | (32.6) | |
Liberty Costa Rica | 108.0 | | | 36.3 | | | 71.7 | | | (3.3) | | | 74.1 | | | 0.9 | |
Corporate | 5.5 | | | 5.4 | | | 0.1 | | | — | | | — | | | 0.1 | |
Intersegment eliminations | (6.1) | | | (5.7) | | | (0.4) | | | — | | | — | | | (0.4) | |
Total | $ | 1,217.6 | | | $ | 1,173.2 | | | $ | 44.4 | | | $ | (33.7) | | | $ | 77.1 | | | $ | 1.0 | |
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 585.5 |
| | $ | 575.6 |
| | $ | 9.9 |
| | 1.7 |
|
VTR | 263.8 |
| | 229.3 |
| | 34.5 |
| | 15.0 |
|
Liberty Puerto Rico | 61.8 |
| | 106.7 |
| | (44.9 | ) | | (42.1 | ) |
Intersegment eliminations | (1.2 | ) | | (0.7 | ) | | (0.5 | ) | | N.M. |
|
Total | $ | 909.9 |
| | $ | 910.9 |
| | $ | (1.0 | ) | | (0.1 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
C&W Caribbean and Networks | $ | 899.4 | | | $ | 864.0 | | | $ | 35.4 | | | $ | (11.0) | | | $ | — | | | $ | 46.4 | |
C&W Panama | 268.8 | | | 260.6 | | | 8.2 | | | — | | | — | | | 8.2 | |
Liberty Puerto Rico | 733.4 | | | 721.7 | | | 11.7 | | | — | | | 5.9 | | | 5.8 | |
VTR | 320.8 | | | 419.6 | | | (98.8) | | | (46.6) | | | — | | | (52.2) | |
Liberty Costa Rica | 215.4 | | | 72.5 | | | 142.9 | | | (5.1) | | | 146.1 | | | 1.9 | |
Corporate | 11.1 | | | 10.8 | | | 0.3 | | | — | | | — | | | 0.3 | |
Intersegment eliminations | (12.6) | | | (10.8) | | | (1.8) | | | — | | | — | | | (1.8) | |
Total | $ | 2,436.3 | | | $ | 2,338.4 | | | $ | 97.9 | | | $ | (62.7) | | | $ | 152.0 | | | $ | 8.6 | |
N.M. — Not Meaningful.
Consolidated. The decreaseC&W Caribbean and Networks. during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes a decrease of $45 million at Liberty Puerto Rico primarily attributable to the hurricanes,C&W Caribbean and increases of $10 million and $23 million attributable to the impacts of the C&W Carve-out Acquisition and FX, respectively. Excluding the effects of the C&W Carve-out Acquisition and FX, revenue decreased $34 million or 3.7%. The organic decrease includes declines of $45 million and $1 million at Liberty Puerto Rico and C&W, respectively, and an increase of $13 million at VTR, as further discussed below.
As further described in notes 2 and 3 to our condensed consolidated financial statements, we adopted ASU 2014-09 effective January 1, 2018 using the cumulative effect transition method. The impact to revenue during three months ended March 31, 2018 was not material.
C&W. C&W’sNetworks’ revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 119.6 | | | $ | 118.2 | | | $ | 1.4 | | | 1 | |
Non-subscription revenue | 8.5 | | | 8.9 | | | (0.4) | | | (4) | |
Total residential fixed revenue | 128.1 | | | 127.1 | | | 1.0 | | | 1 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 77.6 | | | 75.0 | | | 2.6 | | | 3 | |
Interconnect, inbound roaming, equipment sales and other (a) | 16.3 | | | 16.5 | | | (0.2) | | | (1) | |
Total residential mobile revenue | 93.9 | | | 91.5 | | | 2.4 | | | 3 | |
Total residential revenue | 222.0 | | | 218.6 | | | 3.4 | | | 2 | |
B2B revenue: | | | | | | | |
Service revenue | 159.0 | | | 152.8 | | | 6.2 | | | 4 | |
Subsea network revenue | 73.5 | | | 62.8 | | | 10.7 | | | 17 | |
Total B2B revenue | 232.5 | | | 215.6 | | | 16.9 | | | 8 | |
Total | $ | 454.5 | | | $ | 434.2 | | | $ | 20.3 | | | 5 | |
(a)Revenue from inbound roaming was $7 million and $6 million, respectively.
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue: | | | | | | | |
Video | $ | 42.7 |
| | $ | 40.5 |
| | $ | 2.2 |
| | 5.4 |
|
Broadband internet | 53.7 |
| | 52.8 |
| | 0.9 |
| | 1.7 |
|
Fixed-line telephony | 26.9 |
| | 29.3 |
| | (2.4 | ) | | (8.2 | ) |
Total subscription revenue | 123.3 |
| | 122.6 |
| | 0.7 |
| | 0.6 |
|
Non-subscription revenue | 21.5 |
| | 23.5 |
| | (2.0 | ) | | (8.5 | ) |
Total residential fixed revenue | 144.8 |
| | 146.1 |
| | (1.3 | ) | | (0.9 | ) |
Residential mobile revenue: | | | | | | | |
Subscription revenue | 155.1 |
| | 161.8 |
| | (6.7 | ) | | (4.1 | ) |
Non-subscription revenue | 22.1 |
| | 19.9 |
| | 2.2 |
| | 11.1 |
|
Total residential mobile revenue | 177.2 |
| | 181.7 |
| | (4.5 | ) | | (2.5 | ) |
Total residential revenue | 322.0 |
| | 327.8 |
| | (5.8 | ) | | (1.8 | ) |
B2B revenue: | | | | | | | |
Non-subscription revenue | 203.9 |
| | 201.4 |
| | 2.5 |
| | 1.2 |
|
Sub-sea network revenue | 59.6 |
| | 46.4 |
| | 13.2 |
| | 28.4 |
|
Total B2B revenue | 263.5 |
| | 247.8 |
| | 15.7 |
| | 6.3 |
|
Total | $ | 585.5 |
| | $ | 575.6 |
| | $ | 9.9 |
| | 1.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 241.3 | | | $ | 235.6 | | | $ | 5.7 | | | 2 | |
Non-subscription revenue | 17.6 | | | 17.4 | | | 0.2 | | | 1 | |
Total residential fixed revenue | 258.9 | | | 253.0 | | | 5.9 | | | 2 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 154.1 | | | 146.8 | | | 7.3 | | | 5 | |
Interconnect, inbound roaming, equipment sales and other (a) | 30.8 | | | 30.1 | | | 0.7 | | | 2 | |
Total residential mobile revenue | 184.9 | | | 176.9 | | | 8.0 | | | 5 | |
Total residential revenue | 443.8 | | | 429.9 | | | 13.9 | | | 3 | |
B2B revenue: | | | | | | | |
Service revenue | 317.2 | | | 303.6 | | | 13.6 | | | 4 | |
Subsea network revenue | 138.4 | | | 130.5 | | | 7.9 | | | 6 | |
Total B2B revenue | 455.6 | | | 434.1 | | | 21.5 | | | 5 | |
Total | $ | 899.4 | | | $ | 864.0 | | | $ | 35.4 | | | 4 | |
(a)Revenue from inbound roaming was $13 millionand $11 million, respectively.
The details of the changes in C&W’s&W Caribbean and Networks’ revenue during the three and six months ended March 31, 2018,June 30, 2022, as compared to the corresponding periodperiods in 2017,2021, are set forth below:below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 4.7 | | | $ | 12.0 | |
ARPU (b) | (2.7) | | | (3.7) | |
Increase (decrease) in residential fixed non-subscription revenue | (0.4) | | | 0.3 | |
Total increase in residential fixed revenue | 1.6 | | | 8.6 | |
Increase in residential mobile service revenue (c) | 3.2 | | | 9.2 | |
Increase in residential mobile interconnect, inbound roaming, equipment sales and other revenue | — | | | 1.0 | |
Increase in B2B service revenue (d) | 7.9 | | | 18.4 | |
Increase in B2B subsea network revenue (e) | 11.3 | | | 9.2 | |
Total organic increase | 24.0 | | | 46.4 | |
Impact of FX | (3.7) | | | (11.0) | |
Total | $ | 20.3 | | | $ | 35.4 | |
(a)The increases are primarily attributable to higher average broadband internet RGUs.
(b)The decreases are primarily due to lower ARPU from video and broadband internet services, partially offset by higher ARPU from fixed-line telephony services.
(c)The increases are attributable to the net effect of (i) higher average numbers of mobile subscribers, mostly due to growth from fixed-mobile convergence efforts and increases in sales initiatives, and (ii) declines in ARPU as a result of certain pricing strategies.
(d)The increases are attributable to higher revenues from (i) fixed and managed services, primarily due to broadband internet services-related growth, (ii) mobile services, driven by higher volumes, and (iii) for the six-month comparison, certain non-recurring B2B contracts.
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 4.0 |
| | $ | — |
| | $ | 4.0 |
|
ARPU (b) | (3.7 | ) | | — |
| | (3.7 | ) |
Decrease in residential fixed non-subscription revenue (c) | — |
| | (2.0 | ) | | (2.0 | ) |
Total increase (decrease) in residential fixed revenue | 0.3 |
| | (2.0 | ) | | (1.7 | ) |
Increase (decrease) in residential mobile revenue (d) | (7.1 | ) | | 2.2 |
| | (4.9 | ) |
Increase in B2B revenue (e) | — |
| | 0.1 |
| | 0.1 |
|
Increase in B2B sub-sea network revenue (f) | — |
| | 5.1 |
| | 5.1 |
|
Total organic increase (decrease) | (6.8 | ) | | 5.4 |
| | (1.4 | ) |
Impact of the C&W Carve-out Acquisition | — |
| | 9.5 |
| | 9.5 |
|
Impact of FX | 0.8 |
| | 1.0 |
| | 1.8 |
|
Total | $ | (6.0 | ) | | $ | 15.9 |
| | $ | 9.9 |
|
| |
(a) | The increase is primarily attributable to higher broadband internet RGUs. |
| |
(b) | The decrease is primarily attributable to the net effect of (i) lower ARPU from fixed-line telephony and broadband internet services and (ii) higher ARPU from video services. |
(e)The increases are primarily due to the net positive impact associated with the recognition of deferred revenue and penalties upon termination of customer contracts during (i) the first and second quarters of 2022 and (ii) the first quarter of 2021.
| |
(c) | The decrease is primarily attributable to lower advertising revenue and late fees. |
| |
(d) | The decrease in mobile subscription revenue is primarily attributable to the net effect of (i) lower revenue in (a) the Bahamasassociated with a decrease in the average number of subscribers and lower ARPU, primarily driven by the commercial launch of mobile services by a competitor during the fourth quarter of 2016, and (b) Panama due primarily to a decrease in the average number of subscribers and (ii) higher revenue in Jamaica mostly due to higher ARPU. The increase in mobile non-subscription revenue is primarily attributable to an increase in revenue from handset sales.
|
| |
(e) | The increase is primarily attributable to (i) project-related revenue in managed services, driven by increases in Jamaica that were partially offset by decreases in Panama and (ii) individually insignificant changes across the markets of C&W. |
| |
(f) | The increase is primarily due to increased capacity sales on C&W’s sub-sea network to new and existing customers. |
VTR.
C&W Panama. C&W Panama’s revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 24.1 | | | $ | 21.2 | | | $ | 2.9 | | | 14 | |
Non-subscription revenue | 1.8 | | | 2.4 | | | (0.6) | | | (25) | |
Total residential fixed revenue | 25.9 | | | 23.6 | | | 2.3 | | | 10 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 43.9 | | | 44.6 | | | (0.7) | | | (2) | |
Interconnect, inbound roaming, equipment sales and other (a) | 11.1 | | | 11.3 | | | (0.2) | | | (2) | |
Total residential mobile revenue | 55.0 | | | 55.9 | | | (0.9) | | | (2) | |
Total residential revenue | 80.9 | | | 79.5 | | | 1.4 | | | 2 | |
| | | | | | | |
B2B service revenue | 60.7 | | | 53.8 | | | 6.9 | | | 13 | |
Total | $ | 141.6 | | | $ | 133.3 | | | $ | 8.3 | | | 6 | |
(a)Revenue from inbound roaming was$1 million for both periods presented.
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 47.8 | | | $ | 42.4 | | | $ | 5.4 | | | 13 | |
Non-subscription revenue | 4.0 | | | 4.9 | | | (0.9) | | | (18) | |
Total residential fixed revenue | 51.8 | | | 47.3 | | | 4.5 | | | 10 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 86.9 | | | 89.2 | | | (2.3) | | | (3) | |
Interconnect, inbound roaming, equipment sales and other (a) | 21.5 | | | 21.6 | | | (0.1) | | | — | |
Total residential mobile revenue | 108.4 | | | 110.8 | | | (2.4) | | | (2) | |
Total residential revenue | 160.2 | | | 158.1 | | | 2.1 | | | 1 | |
| | | | | | | |
B2B service revenue | 108.6 | | | 102.5 | | | 6.1 | | | 6 | |
Total | $ | 268.8 | | | $ | 260.6 | | | $ | 8.2 | | | 3 | |
(a)Revenue from inbound roaming was$2 million and $1 million, respectively.
The details of the changes in C&W Panama’s revenue during the three and six months ended June 30, 2022, as compared to the corresponding periods in 2021, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 3.7 | | | $ | 7.1 | |
ARPU | (0.8) | | | (1.7) | |
Decrease in residential fixed non-subscription revenue | (0.6) | | | (0.9) | |
Total increase in residential fixed revenue | 2.3 | | | 4.5 | |
Decrease in residential mobile service revenue (b) | (0.7) | | | (2.3) | |
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue | (0.2) | | | (0.1) | |
Increase in B2B service revenue (c) | 6.9 | | | 6.1 | |
Total organic increase | $ | 8.3 | | | $ | 8.2 | |
| | | |
(a)Theincreasesare primarily attributable to higher average broadband internet and video RGUs.
(b)The decreases are primarily due to the net effect of (i) lower ARPU from prepaid mobile services, mainly attributable to lower recharging activity, and (ii) higher average numbers of postpaid mobile subscribers.
(c)The increases are primarily due to (i) increases in the volume of certain projects, (ii) higher revenue from data services and (iii) increased mobile handset revenue.
Liberty Puerto Rico.Liberty Puerto Rico’s revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 115.5 | | | $ | 109.5 | | | $ | 6.0 | | | 5 | |
Non-subscription revenue | 5.6 | | | 4.9 | | | 0.7 | | | 14 | |
Total residential fixed revenue | 121.1 | | | 114.4 | | | 6.7 | | | 6 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 117.2 | | | 123.7 | | | (6.5) | | | (5) | |
Interconnect, inbound roaming, equipment sales and other (a) | 58.3 | | | 58.6 | | | (0.3) | | | (1) | |
Total residential mobile revenue | 175.5 | | | 182.3 | | | (6.8) | | | (4) | |
Total residential revenue | 296.6 | | | 296.7 | | | (0.1) | | | — | |
B2B service revenue | 57.3 | | | 55.2 | | | 2.1 | | | 4 | |
Other revenue | 10.2 | | | 8.5 | | | 1.7 | | | 20 | |
Total | $ | 364.1 | | | $ | 360.4 | | | $ | 3.7 | | | 1 | |
(a)Revenue from inbound roaming was$19 million and $17 million, respectively.
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 231.3 | | | $ | 216.5 | | | $ | 14.8 | | | 7 | |
Non-subscription revenue | 11.0 | | | 9.1 | | | 1.9 | | | 21 | |
Total residential fixed revenue | 242.3 | | | 225.6 | | | 16.7 | | | 7 | |
Residential mobile revenue: | | | | | | | |
Service revenue | 237.1 | | | 240.2 | | | (3.1) | | | (1) | |
Interconnect, inbound roaming, equipment sales and other (a) | 122.2 | | | 131.6 | | | (9.4) | | | (7) | |
Total residential mobile revenue | 359.3 | | | 371.8 | | | (12.5) | | | (3) | |
Total residential revenue | 601.6 | | | 597.4 | | | 4.2 | | | 1 | |
B2B service revenue | 111.3 | | | 107.3 | | | 4.0 | | | 4 | |
Other revenue | 20.5 | | | 17.0 | | | 3.5 | | | 21 | |
Total | $ | 733.4 | | | $ | 721.7 | | | $ | 11.7 | | | 2 | |
(a)Revenue from inbound roaming was$36 millionand $37 million, respectively.
The details of the changes in Liberty Puerto Rico’s revenue during the three and six months ended June 30, 2022, as compared to the corresponding periods in 2021, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 5.6 | | | $ | 13.1 | |
ARPU (b) | (2.3) | | | (3.3) | |
Increase in residential fixed non-subscription revenue | 0.4 | | | 1.0 | |
Total increase in residential fixed revenue | 3.7 | | | 10.8 | |
Decrease in residential mobile service revenue (c) | (6.5) | | | (3.1) | |
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (d) | (0.3) | | | (9.4) | |
Increase in B2B service revenue (e) | 2.1 | | | 4.0 | |
Increase in other revenue (f) | 1.7 | | | 3.5 | |
Total organic increase | 0.7 | | | 5.8 | |
Impact of an acquisition | 3.0 | | | 5.9 | |
Total | $ | 3.7 | | | $ | 11.7 | |
(a)The increases are primarily attributable to higher average broadband internet and video RGUs.
(b)The decreases, which include the impact of credits issued to customers during the second quarter of 2022 as a result of power outages, are primarily attributable to lower ARPU from video and broadband internet services.
(c)The decreases are primarily due to lower ARPU from mobile services and, for the three-month comparison, declines in the average number of mobile subscribers.
(d)For the six-month comparison, the decline is due in part to higher promotions associated with handset sales and a decline in inbound roaming.
(e)The increases are primarily due to the net effect of (i) higher revenue from mobile services and (ii) lower revenue from equipment sales.
(f)The increases are primarily attributable to funds received from the FCC to continue to expand and improve our fixed network in Puerto Rico.
VTR. VTR’s revenue by major category is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Decrease |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 130.0 | | | $ | 182.0 | | | $ | (52.0) | | | (29) | |
Non-subscription revenue | 3.4 | | | 4.0 | | | (0.6) | | | (15) | |
Total residential fixed revenue | 133.4 | | | 186.0 | | | (52.6) | | | (28) | |
Residential mobile revenue: | | | | | | | |
Service revenue | 8.7 | | | 13.0 | | | (4.3) | | | (33) | |
Interconnect, inbound roaming, equipment sales and other | 1.0 | | | 1.8 | | | (0.8) | | | (44) | |
Total residential mobile revenue | 9.7 | | | 14.8 | | | (5.1) | | | (34) | |
Total residential revenue | 143.1 | | | 200.8 | | | (57.7) | | | (29) | |
| | | | | | | |
B2B service revenue | 6.9 | | | 8.5 | | | (1.6) | | | (19) | |
Total | $ | 150.0 | | | $ | 209.3 | | | $ | (59.3) | | | (28) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Decrease |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 279.6 | | | $ | 365.1 | | | $ | (85.5) | | | (23) | |
Non-subscription revenue | 6.5 | | | 7.4 | | | (0.9) | | | (12) | |
Total residential fixed revenue | 286.1 | | | 372.5 | | | (86.4) | | | (23) | |
Residential mobile revenue: | | | | | | | |
Service revenue | 18.0 | | | 26.2 | | | (8.2) | | | (31) | |
Interconnect, inbound roaming, equipment sales and other | 2.1 | | | 4.1 | | | (2.0) | | | (49) | |
Total residential mobile revenue | 20.1 | | | 30.3 | | | (10.2) | | | (34) | |
Total residential revenue | 306.2 | | | 402.8 | | | (96.6) | | | (24) | |
| | | | | | | |
B2B service revenue | 14.6 | | | 16.8 | | | (2.2) | | | (13) | |
Total | $ | 320.8 | | | $ | 419.6 | | | $ | (98.8) | | | (24) | |
|
| | | | | | | | | | | | | |
| Three months ended March 31, | | Increase |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
Subscription revenue: | | | | | | | |
Video | $ | 99.7 |
| | $ | 87.4 |
| | $ | 12.3 |
| | 14.1 |
Broadband internet | 96.6 |
| | 82.3 |
| | 14.3 |
| | 17.4 |
Fixed-line telephony | 34.6 |
| | 34.3 |
| | 0.3 |
| | 0.9 |
Total subscription revenue | 230.9 |
| | 204.0 |
| | 26.9 |
| | 13.2 |
Non-subscription revenue | 7.5 |
| | 7.4 |
| | 0.1 |
| | 1.4 |
Total residential fixed revenue | 238.4 |
| | 211.4 |
| | 27.0 |
| | 12.8 |
Residential mobile revenue: | | | | | | | |
Subscription revenue | 16.3 |
| | 12.6 |
| | 3.7 |
| | 29.4 |
Non-subscription revenue | 3.2 |
| | 2.3 |
| | 0.9 |
| | 39.1 |
Total residential mobile revenue | 19.5 |
| | 14.9 |
| | 4.6 |
| | 30.9 |
Total residential revenue | 257.9 |
| | 226.3 |
| | 31.6 |
| | 14.0 |
B2B revenue: | | | | | | | |
Subscription revenue | 5.6 |
| | 2.7 |
| | 2.9 |
| | 107.4 |
Non-subscription revenue | 0.3 |
| | 0.3 |
| | — |
| | — |
Total B2B revenue | 5.9 |
| | 3.0 |
| | 2.9 |
| | 96.7 |
Total | $ | 263.8 |
| | $ | 229.3 |
| | $ | 34.5 |
| | 15.0 |
The details of the changes in VTR’s revenue during the three and six months ended March 31, 2018,June 30, 2022, as compared to the corresponding periodperiods in 2017,2021, are set forth below:below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Decrease in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | (7.3) | | | $ | (11.8) | |
ARPU (b) | (21.5) | | | (33.1) | |
Change in residential fixed non-subscription revenue | — | | | — | |
Total decrease in residential fixed revenue | (28.8) | | | (44.9) | |
Decrease in residential mobile service revenue (c) | (2.6) | | | (5.5) | |
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue | (0.7) | | | (1.7) | |
Decrease in B2B service revenue | (0.5) | | | (0.1) | |
Total organic decrease | (32.6) | | | (52.2) | |
Impact of FX | (26.7) | | | (46.6) | |
Total | $ | (59.3) | | | $ | (98.8) | |
(a)The decreases are primarily attributable to lower average broadband internet and video RGUs.
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 4.1 |
| | $ | — |
| | $ | 4.1 |
|
ARPU (b) | 4.1 |
| | — |
| | 4.1 |
|
Decrease in residential fixed non-subscription revenue | — |
| | (0.5 | ) | | (0.5 | ) |
Total increase (decrease) in residential fixed revenue | 8.2 |
| | (0.5 | ) | | 7.7 |
|
Increase in residential mobile revenue (c) | 2.4 |
| | 0.6 |
| | 3.0 |
|
Increase in B2B revenue (d) | 2.4 |
| | 0.1 |
| | 2.5 |
|
Total organic increase | 13.0 |
| | 0.2 |
| | 13.2 |
|
Impact of FX | 20.5 |
| | 0.8 |
| | 21.3 |
|
Total | $ | 33.5 |
| | $ | 1.0 |
| | $ | 34.5 |
|
(b)The decreases are primarily due to lower ARPU from broadband internet services, mainly associated with (i) increased competition that generally resulted in (a) the churn of higher-ARPU customers and (b) the addition of lower-ARPU customers, and (ii) strategic initiatives implemented during the first quarter of 2022. Higher discounts and lower-ARPU customers related to video services also contributed to the decline in ARPU.(c)Thedecreases are due to (i) lower ARPU from mobile services and (ii) lower average numbers of mobile subscribers.
| |
(a) | The increase is attributable to the net effect of (i) higher broadband internet and video RGUs and (ii) lower fixed-line telephony RGUs. |
| |
(b) | The increase is primarily due to higher ARPU from video services and an improvement in RGU mix. |
| |
(c) | The increase in mobile subscription revenue is primarily due to a higher average number of mobile subscribers. |
| |
(d) | The increase in B2B subscription revenue is primarily attributable to higher average numbers of broadband internet, video and fixed-line telephony SOHO RGUs. A portion of this increase is attributable to the conversion of certain residential subscribers to SOHO customers. |
Liberty Puerto Rico. Costa RicaDue to the significant impact of the hurricanes on the operations of our . Liberty Puerto Rico segment, we have provided supplementary sequential information in order to provide a meaningful analysis of Liberty Puerto Rico’s business, including recovery after the hurricanes. Accordingly, Liberty Puerto Rico’sCosta Rica’s revenue by major category during each of the three months ended March 31, 2018, December 31, 2017 and March 31, 2017 is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 33.4 | | | $ | 34.6 | | | $ | (1.2) | | | (3) | |
Non-subscription revenue | 0.8 | | | 1.7 | | | (0.9) | | | (53) | |
Total residential fixed revenue | 34.2 | | | 36.3 | | | (2.1) | | | (6) | |
Residential mobile revenue: | | | | | | | |
Service revenue | 48.6 | | | — | | | 48.6 | | | N.M. |
Interconnect, inbound roaming, equipment sales and other (a) | 15.6 | | | — | | | 15.6 | | | N.M. |
Total residential mobile revenue | 64.2 | | | — | | | 64.2 | | | N.M. |
Total residential revenue | 98.4 | | | 36.3 | | | 62.1 | | | 171 | |
B2B service revenue | 9.6 | | | — | | | 9.6 | | | N.M. |
Total | $ | 108.0 | | | $ | 36.3 | | | $ | 71.7 | | | 198 | |
N.M. — Not Meaningful.
(a)Amount includes $2 million of revenue from inbound roaming.
|
| | | | | | | | | | | |
| Three months ended |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 |
| in millions |
Residential fixed revenue: | | | | | |
Subscription revenue: | | | | | |
Video | $ | 23.3 |
| | $ | 5.3 |
| | $ | 42.7 |
|
Broadband internet | 25.3 |
| | 7.8 |
| | 40.4 |
|
Fixed-line telephony | 3.5 |
| | 1.2 |
| | 6.4 |
|
Total subscription revenue | 52.1 |
| | 14.3 |
| | 89.5 |
|
Non-subscription revenue | 1.7 |
| | 0.5 |
| | 5.9 |
|
Total residential fixed revenue | 53.8 |
| | 14.8 |
| | 95.4 |
|
B2B revenue: | | | | | |
Subscription revenue | 4.3 |
| | 1.3 |
| | 6.7 |
|
Non-subscription revenue | 3.0 |
| | 0.7 |
| | 3.3 |
|
Total B2B revenue | 7.3 |
| | 2.0 |
| | 10.0 |
|
Other revenue | 0.7 |
| | 0.1 |
| | 1.3 |
|
Total | $ | 61.8 |
| | $ | 16.9 |
| | $ | 106.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) |
| 2022 | | 2021 | | $ | | % |
| in millions, except percentages |
Residential revenue: | | | | | | | |
Residential fixed revenue: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Subscription revenue | $ | 68.1 | | | $ | 69.2 | | | $ | (1.1) | | | (2) | |
Non-subscription revenue | 1.6 | | | 3.3 | | | (1.7) | | | (52) | |
Total residential fixed revenue | 69.7 | | | 72.5 | | | (2.8) | | | (4) | |
Residential mobile revenue: | | | | | | | |
Service revenue | 94.8 | | | — | | | 94.8 | | | N.M. |
Interconnect, inbound roaming, equipment sales and other (a) | 32.1 | | | — | | | 32.1 | | | N.M. |
Total residential mobile revenue | 126.9 | | | — | | | 126.9 | | | N.M. |
Total residential revenue | 196.6 | | | 72.5 | | | 124.1 | | | 171 | |
| | | | | | | |
B2B service revenue | 18.8 | | | — | | | 18.8 | | | N.M. |
| | | | | | | |
Total | $ | 215.4 | | | $ | 72.5 | | | $ | 142.9 | | | 197 | |
N.M. — Not Meaningful.
(a)Amount includes $4 million of revenue from inbound roaming.
The decreasedetails of the changes in Liberty Puerto Rico’sCosta Rica’s revenue during the three and six months ended March 31, 2018,June 30, 2022, as compared to the three months ended March 31, 2017, iscorresponding periods in 2021, are set forth below (in millions):
| | | | | | | | | | | |
| Three-month comparison | | Six-month comparison |
Increase (decrease) in residential fixed subscription revenue due to change in: | | | |
Average number of RGUs (a) | $ | 4.1 | | | $ | 7.7 | |
ARPU (b) | (2.3) | | | (4.1) | |
Decrease in residential fixed non-subscription revenue | (0.9) | | | (1.7) | |
Total organic increase | 0.9 | | | 1.9 | |
Impact of an acquisition | 74.1 | | | 146.1 | |
Impact of FX | (3.3) | | | (5.1) | |
Total | $ | 71.7 | | | $ | 142.9 | |
(a)The increases are primarily attributable to Hurricanes Maria and Irma.higher average broadband internet RGUs.
(b)The table below presents changes in (i) residential fixed subscription revenuedecreases are primarily due to changes in the average numbernet effect of RGUs(i) lower ARPU from video services, (ii) the impact of product mix and (iii) higher ARPU (ii) residential fixed non-subscription revenue, (iii) B2B revenue and (iv) other revenue, each reflective of changes during the three months ended March 31, 2018, as compared to the three months ended December 31, 2017.from broadband internet services.
|
| | | | | | | | | | | |
| Subscription revenue | | Non-subscription revenue | | Total |
| in millions |
Increase in residential fixed subscription revenue due to change in: | | | | | |
Average number of RGUs (a) | $ | 35.5 |
| | $ | — |
| | $ | 35.5 |
|
ARPU (b) | 2.3 |
| | — |
| | 2.3 |
|
Increase in residential fixed non-subscription revenue (c) | — |
| | 1.2 |
| | 1.2 |
|
Total increase in residential fixed revenue | 37.8 |
| | 1.2 |
| | 39.0 |
|
Increase in B2B revenue (d) | 3.0 |
| | 2.3 |
| | 5.3 |
|
Increase in other revenue | — |
| | 0.6 |
| | 0.6 |
|
Total | $ | 40.8 |
| | $ | 4.1 |
| | $ | 44.9 |
|
| |
(a) | The increase is attributable to increases in broadband internet, video and fixed-line telephony RGUs, primarily due to the reconnection of subscribers associated with the recovery in Puerto Rico following the hurricanes. |
| |
(b) | The increase is primarily attributable to reconnecting higher ARPU customers during the first quarter of 2018. |
| |
(c) | The increase is primarily due to higher late fees, advertising revenue and reconnect fees resulting from Liberty Puerto Rico’s ongoing recovery from the hurricanes. |
| |
(d) | The increase in subscription revenue is primarily attributable to increases in broadband internet, fixed-line telephony and video SOHO RGUs, primarily due to the reconnection of subscribers associated with the recovery in Puerto Rico following the hurricanes. The increase in non-subscription revenue is primarily attributable to higher revenue from broadband internet services, resulting from the restoration of fiber circuits to Liberty Puerto Rico’s B2B customers. |
Programming and Other Direct Costsother direct costs of Servicesservices
General.Programming and other direct costs of services include programming and copyright costs, mobileinterconnect and access and interconnect costs, equipment costs, which primarily relate to costs of mobile handsets and other devices, and other direct costs related to our operations. Notwithstanding the impact of the hurricanes, programmingProgramming and copyright costs, which represent a significant portion of our operating costs, are expected to risemay increase in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases andor (iii) growth in the number of our enhanced video subscribers.
Consolidated. The following table setstables set forth programmingthe organic and other direct costs of services by reportable segment:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 130.2 |
| | $ | 133.4 |
| | $ | (3.2 | ) | | (2.4 | ) |
VTR | 70.5 |
| | 61.6 |
| | 8.9 |
| | 14.4 |
|
Liberty Puerto Rico | 16.5 |
| | 27.6 |
| | (11.1 | ) | | (40.2 | ) |
Intersegment eliminations | (1.4 | ) | | (0.7 | ) | | (0.7 | ) | | N.M. |
|
Total | $ | 215.8 |
| | $ | 221.9 |
| | $ | (6.1 | ) | | (2.7 | ) |
N.M. — Not Meaningful.
Consolidated. The decreasenon-organic changes in programming and other direct costs of services duringon a consolidated basis for the three months ended March 31, 2018, as compared toperiods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 101.2 | | | $ | 114.4 | | | $ | (13.2) | | | $ | (7.6) | | | $ | — | | | $ | (5.6) | |
Interconnect | 88.4 | | | 80.1 | | | 8.3 | | | (1.9) | | | 9.2 | | | 1.0 | |
Equipment and other | 109.9 | | | 84.9 | | | 25.0 | | | (0.4) | | | 9.6 | | | 15.8 | |
Total programming and other direct costs of services | $ | 299.5 | | | $ | 279.4 | | | $ | 20.1 | | | $ | (9.9) | | | $ | 18.8 | | | $ | 11.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 210.5 | | | $ | 226.2 | | | $ | (15.7) | | | $ | (13.7) | | | $ | — | | | $ | (2.0) | |
Interconnect | 174.1 | | | 160.7 | | | 13.4 | | | (4.2) | | | 16.4 | | | 1.2 | |
Equipment and other | 217.1 | | | 176.2 | | | 40.9 | | | (0.9) | | | 19.0 | | | 22.8 | |
Total programming and other direct costs of services | $ | 601.7 | | | $ | 563.1 | | | $ | 38.6 | | | $ | (18.8) | | | $ | 35.4 | | | $ | 22.0 | |
C&W Caribbean and Networks. The following tables set forth the corresponding periodorganic and non-organic changes in 2017, includes a decrease of $11 million at Liberty Puerto Rico primarily attributable to the hurricanes, an increase of $4 million attributable to the impact of the C&W Carve-out Acquisition and an increase of $6 million due to FX. Excluding the effects of the C&W Carve-out Acquisition and FX, our programming and other direct costs of services decreased $17 million or 7.5%. for our C&W Caribbean and Networks segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 22.8 | | | $ | 23.2 | | | $ | (0.4) | | | $ | (0.1) | | | $ | (0.3) | |
Interconnect | 36.3 | | | 37.6 | | | (1.3) | | | (0.6) | | | (0.7) | |
Equipment and other | 19.3 | | | 16.4 | | | 2.9 | | | (0.2) | | | 3.1 | |
Total programming and other direct costs of services | $ | 78.4 | | | $ | 77.2 | | | $ | 1.2 | | | $ | (0.9) | | | $ | 2.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 45.9 | | | $ | 46.9 | | | $ | (1.0) | | | $ | (0.5) | | | $ | (0.5) | |
Interconnect | 73.9 | | | 75.2 | | | (1.3) | | | (1.9) | | | 0.6 | |
Equipment and other | 39.7 | | | 33.0 | | | 6.7 | | | (0.6) | | | 7.3 | |
Total programming and other direct costs of services | $ | 159.5 | | | $ | 155.1 | | | $ | 4.4 | | | $ | (3.0) | | | $ | 7.4 | |
•Equipment and other: The organic decrease includes declinesincreases are primarily due to (i) higher volumes of $8 millionhandset sales and $11 million at C&W and Liberty Puerto Rico, respectively, and an increase of $3 million at VTR, as further discussed below.(ii) for the six-month comparison, higher costs associated with certain non-recurring B2B contracts.
C&W. &W Panama.The decreasefollowing tables set forth the organic changes in C&W’s programming and other direct costs of services includes an increase of $4 million attributable tofor our C&W Panama segment for the impact of the C&W Carve-out Acquisitionperiods indicated.
| | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Organic increase (decrease) |
| 2022 | | 2021 | |
| in millions |
| | | | | |
Programming and copyright | $ | 4.3 | | | $ | 3.9 | | | $ | 0.4 | |
Interconnect | 15.2 | | | 15.5 | | | (0.3) | |
Equipment and other | 28.7 | | | 22.4 | | | 6.3 | |
Total programming and other direct costs of services | $ | 48.2 | | | $ | 41.8 | | | $ | 6.4 | |
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Organic increase (decrease) |
| 2022 | | 2021 | |
| in millions |
| | | | | |
Programming and copyright | $ | 8.3 | | | $ | 7.6 | | | $ | 0.7 | |
Interconnect | 30.4 | | | 30.7 | | | (0.3) | |
Equipment and other | 46.3 | | | 40.0 | | | 6.3 | |
Total programming and other direct costs of services | $ | 85.0 | | | $ | 78.3 | | | $ | 6.7 | |
•Equipment and an increase of $1 millionother: The organic increases are primarily due to FX. Excluding(i) higher volumes of handset sales and (ii) higher costs associated with certain non-recurring B2B contracts.
Liberty Puerto Rico. The following tables set forth the effects of the C&W Carve-out Acquisitionorganic and FX, C&W’snon-organic changes in programming and other direct costs of services decreased $8 million or 6.0%. This decrease includesfor our Liberty Puerto Rico segment for the following factors:periods indicated.
A decrease in mobile handset costs of $5 million or 20.7%, primarily due to lower mobile handset sales;
A decrease in mobile access and interconnect costs of $1 million or 2.0%, primarily due to lower call volumes; and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Increase from: |
| Three months ended June 30, | | Increase | | An acquisition | | Organic |
| 2022 | | 2021 | | | |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 28.3 | | | $ | 27.8 | | | $ | 0.5 | | | $ | — | | | $ | 0.5 | |
Interconnect | 21.9 | | | 20.7 | | | 1.2 | | | 0.7 | | | 0.5 | |
Equipment and other | 51.4 | | | 43.4 | | | 8.0 | | | 0.1 | | | 7.9 | |
Total programming and other direct costs of services | $ | 101.6 | | | $ | 91.9 | | | $ | 9.7 | | | $ | 0.8 | | | $ | 8.9 | |
A net decrease resulting from other individually insignificant changes in other direct cost categories.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Increase (decrease) from: |
| Six months ended June 30, | | Increase | | An acquisition | | Organic |
| 2022 | | 2021 | | | |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 55.9 | | | $ | 55.0 | | | $ | 0.9 | | | $ | — | | | $ | 0.9 | |
Interconnect | 41.3 | | | 41.3 | | | — | | | 1.3 | | | (1.3) | |
Equipment and other | 110.7 | | | 96.2 | | | 14.5 | | | 0.3 | | | 14.2 | |
Total programming and other direct costs of services | $ | 207.9 | | | $ | 192.5 | | | $ | 15.4 | | | $ | 1.6 | | | $ | 13.8 | |
VTR.•Equipment and other: The organic increases are primarily associated with (i) higher volumes of (a) data-related equipment sales associated with a contract entered into in the first quarter of 2022 and (b) handset sales, (ii) the negative impact of an equipment cost reimbursement received during the second quarter of 2021 in accordance with an agreement with AT&T, (iii) equipment-related integration costs incurred during the three and six months ended June 30, 2022 and (iv) an increase related to a lower of cost or market adjustment on equipment-related inventory recognized during the second quarter of 2022.
VTR. The following tables set forth the organic and non-organic changes in VTR’s programming and other direct costs of services for our VTR segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 36.9 | | | $ | 50.5 | | | $ | (13.6) | | | $ | (6.6) | | | $ | (7.0) | |
Interconnect | 7.4 | | | 6.6 | | | 0.8 | | | (1.3) | | | 2.1 | |
Equipment and other | 1.2 | | | 2.5 | | | (1.3) | | | (0.2) | | | (1.1) | |
Total programming and other direct costs of services | $ | 45.5 | | | $ | 59.6 | | | $ | (14.1) | | | $ | (8.1) | | | $ | (6.0) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Programming and copyright | $ | 82.6 | | | $ | 98.9 | | | $ | (16.3) | | | $ | (11.9) | | | $ | (4.4) | |
Interconnect | 15.1 | | | 14.4 | | | 0.7 | | | (2.2) | | | 2.9 | |
Equipment and other | 2.3 | | | 6.5 | | | (4.2) | | | (0.3) | | | (3.9) | |
Total programming and other direct costs of services | $ | 100.0 | | | $ | 119.8 | | | $ | (19.8) | | | $ | (14.4) | | | $ | (5.4) | |
•Programming and copyright: The organic includes an increase of $6 milliondue to FX. Excluding the effect of FX, VTR’s programming and other direct costs of services increased $3 million or 5.2%. This increase includes the following factors:
An increase in programming and copyright costs of $1 million or 3.5%,decreases are primarily due to the net effect of (i) lower average subscribers, (ii) the positive impact associated with the reassessment of an accrual associated with video-on-demand content-related costs during the second quarter of 2022, and (iii) for the six-month comparison, an increase in certain premium and basic content costs duerelated to rate increases, (ii) a decrease in the foreign currency impact of programming contracts denominated in U.S. dollars and (ii) higher costssettlement associated with video-on-demand;a programming contract that occurred during the first quarter of 2022.
An increase in mobile access and interconnect costs of $1 million or 8.2%,•Interconnect: The organic increases are primarily due to (i) higher national leased capacity. In addition, for the six-month comparison, MVNO charges were flat, as an increase during the second quarter was offset by a decrease during the first quarter.
•Equipment and (ii) a net increase in interconnect costs from higher callother: The organic decreases are primarily due to lower volumes and lower interconnect rates.of equipment sales.
Liberty Puerto Rico.Costa Rica. The decreasefollowing tables set forth the organic and non-organic changes in Liberty Puerto Rico’s programming and other direct costs of services isfor our Liberty Costa Rica segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase (decrease) | | Increase (decrease) from: |
| Three months ended June 30, | | | | | An acquisition | | |
| 2022 | | 2021 | | | FX | | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 8.9 | | | $ | 9.0 | | | $ | (0.1) | | | $ | (0.9) | | | $ | — | | | $ | 0.8 | |
Interconnect | 9.1 | | | 0.7 | | | 8.4 | | | — | | | 8.5 | | | (0.1) | |
Equipment and other | 9.6 | | | 0.7 | | | 8.9 | | | — | | | 9.5 | | | (0.6) | |
Total programming and other direct costs of services | $ | 27.6 | | | $ | 10.4 | | | $ | 17.2 | | | $ | (0.9) | | | $ | 18.0 | | | $ | 0.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Increase (decrease) from: |
| Six months ended June 30, | | | | | | An acquisition | | |
| 2022 | | 2021 | | Increase | | FX | | | Organic |
| in millions |
| | | | | | | | | | | |
Programming and copyright | $ | 17.8 | | | $ | 17.8 | | | $ | — | | | $ | (1.3) | | | $ | — | | | $ | 1.3 | |
Interconnect | 16.3 | | | 1.3 | | | 15.0 | | | (0.1) | | | 15.1 | | | — | |
Equipment and other | 18.9 | | | 1.5 | | | 17.4 | | | — | | | 18.7 | | | (1.3) | |
Total programming and other direct costs of services | $ | 53.0 | | | $ | 20.6 | | | $ | 32.4 | | | $ | (1.4) | | | $ | 33.8 | | | $ | — | |
Other operating costs and expenses
Other operating costs and expenses set forth in the tables below comprise the following cost categories:
•Personnel and contract labor-related costs, which primarily include salary-related and cash bonus expenses, net of capitalizable labor costs, and temporary contract labor costs;
•Network-related expenses, which primarily include costs related to network access, system power, core network, and CPE repair, maintenance and test costs;
•Service-related costs, which primarily include professional services, information technology-related services, audit, legal and other services;
•Commercial, which primarily includes sales and marketing costs, such as advertising, commissions and other sales and marketing-related costs, and customer care costs related to outsourced call centers;
•Facility, provision, franchise and other, which primarily includes facility-related costs, provision for bad debt expense, franchise-related fees, bank fees, insurance, vehicle-related, travel and entertainment and other operating-related costs; and
•Share-based compensation expense that relates to (i) equity awards issued to our employees and Directors and (ii) certain bonus-related expenses that are paid in the form of equity.
Consolidated.The following tables set forth the organic and non-organic changes in other operating costs and expenses on a consolidated basis for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 145.1 | | | $ | 143.8 | | | $ | 1.3 | | | $ | (3.3) | | | $ | 3.5 | | | $ | 1.1 | |
Network-related | 78.9 | | | 82.1 | | | (3.2) | | | (4.0) | | | 4.8 | | | (4.0) | |
Service-related | 54.6 | | | 45.3 | | | 9.3 | | | (1.8) | | | 3.8 | | | 7.3 | |
Commercial | 58.1 | | | 53.7 | | | 4.4 | | | (3.4) | | | 11.1 | | | (3.3) | |
Facility, provision, franchise and other | 117.9 | | | 104.9 | | | 13.0 | | | (2.2) | | | 10.4 | | | 4.8 | |
Share-based compensation expense | 31.8 | | | 32.8 | | | (1.0) | | | (0.8) | | | 0.2 | | | (0.4) | |
Total other operating costs and expenses | $ | 486.4 | | | $ | 462.6 | | | $ | 23.8 | | | $ | (15.5) | | | $ | 33.8 | | | $ | 5.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Acquisitions | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 298.3 | | | $ | 282.2 | | | $ | 16.1 | | | $ | (6.1) | | | $ | 7.8 | | | $ | 14.4 | |
Network-related | 161.5 | | | 161.1 | | | 0.4 | | | (7.1) | | | 10.5 | | | (3.0) | |
Service-related | 105.8 | | | 92.8 | | | 13.0 | | | (2.8) | | | 8.8 | | | 7.0 | |
Commercial | 123.6 | | | 106.1 | | | 17.5 | | | (6.2) | | | 22.7 | | | 1.0 | |
Facility, provision, franchise and other | 241.7 | | | 219.8 | | | 21.9 | | | (3.8) | | | 24.2 | | | 1.5 | |
Share-based compensation expense | 61.8 | | | 55.8 | | | 6.0 | | | (1.2) | | | 0.8 | | | 6.4 | |
Total other operating costs and expenses | $ | 992.7 | | | $ | 917.8 | | | $ | 74.9 | | | $ | (27.2) | | | $ | 74.8 | | | $ | 27.3 | |
C&W Caribbean and Networks. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our C&W Caribbean and Networks segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 62.0 | | | $ | 62.1 | | | $ | (0.1) | | | $ | (0.4) | | | $ | 0.3 | |
Network-related | 34.3 | | | 37.4 | | | (3.1) | | | (0.4) | | | (2.7) | |
Service-related | 17.7 | | | 17.7 | | | — | | | (0.1) | | | 0.1 | |
Commercial | 11.1 | | | 12.4 | | | (1.3) | | | (0.1) | | | (1.2) | |
Facility, provision, franchise and other | 41.4 | | | 39.3 | | | 2.1 | | | (0.4) | | | 2.5 | |
Share-based compensation expense | 7.8 | | | 8.9 | | | (1.1) | | | (0.1) | | | (1.0) | |
Total other operating costs and expenses | $ | 174.3 | | | $ | 177.8 | | | $ | (3.5) | | | $ | (1.5) | | | $ | (2.0) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | Organic |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 125.6 | | | $ | 126.4 | | | $ | (0.8) | | | $ | (1.5) | | | $ | 0.7 | |
Network-related | 73.1 | | | 75.2 | | | (2.1) | | | (1.1) | | | (1.0) | |
Service-related | 36.1 | | | 35.4 | | | 0.7 | | | (0.2) | | | 0.9 | |
Commercial | 22.3 | | | 23.6 | | | (1.3) | | | (0.4) | | | (0.9) | |
Facility, provision, franchise and other | 80.7 | | | 78.9 | | | 1.8 | | | (0.9) | | | 2.7 | |
Share-based compensation expense | 15.0 | | | 15.1 | | | (0.1) | | | (0.1) | | | — | |
Total other operating costs and expenses | $ | 352.8 | | | $ | 354.6 | | | $ | (1.8) | | | $ | (4.2) | | | $ | 2.4 | |
•Personnel and contract labor: The organic increases are primarily due to a declinethe net impact of (i) increases in programming and copyright costs of $10 million or 42.7% mostly attributable to (i) $7 million of credits from vendors stemming from Hurricanes Irma and Mariasalary-related expenses and (ii) lower costs of $4 million resulting from disconnects of enhanced video subscribersbonus-related expenses.
•Network-related: The organic decreases are primarily due to the net impact of the hurricanes.
Other Operating Expenses
General. Other operating expenses include network operations, customer operations, customer care, share-based compensation and other(i) savings on vendor costs related to our operations.
The following table sets forth other operating expenses by reportable segment:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 109.0 |
| | $ | 117.8 |
| | $ | (8.8 | ) | | (7.5 | ) |
VTR | 42.9 |
| | 36.9 |
| | 6.0 |
| | 16.3 |
|
Liberty Puerto Rico | 14.6 |
| | 15.4 |
| | (0.8 | ) | | (5.2 | ) |
Intersegment eliminations | (0.1 | ) | | (0.1 | ) | | — |
| | N.M. |
|
Total other operating expenses excluding share-based compensation expense | 166.4 |
| | 170.0 |
| | (3.6 | ) | | (2.1 | ) |
Share-based compensation expense | 0.1 |
| | 0.5 |
| | (0.4 | ) | | (80.0 | ) |
Total | $ | 166.5 |
| | $ | 170.5 |
| | $ | (4.0 | ) | | (2.3 | ) |
N.M. — Not Meaningful.
Consolidated. The decrease in other operating expenses during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes increases of $3 million and $4 million attributable to the impact of the C&W Carve-out Acquisition and FX, respectively. Our other operating expenses include share-based compensation expense. For additional information, see the discussion under Share-based compensation expense (included in other operating and SG&A expenses) below. Excluding the effects of the C&W Carve-out Acquisition, FX and share-based compensation expense, our other operating expenses decreased $10 million or 5.8%. The organic decrease includes declines of $12 million and $1 million at C&W and Liberty Puerto Rico, respectively, and an increase of $3 million at VTR, as further discussed below.
C&W. The decrease in C&W’s other operating expenses includes an increase of $3 million attributable to the impact of the C&W Carve-out Acquisition. Excluding the effect of the C&W Carve-out Acquisition, C&W’s other operating expenses (exclusive of share-based compensation expense) decreased $12 million or 9.8%. This decrease includes the following factors:
A decrease in bad debt and collection expenses of $7 million or 50.5%, primarily due to (i) better than expected collections in 2018, including a $3 million recovery related to provisions established following the impacts of Hurricanes Irma and Maria, and (ii) a decrease resulting from provisions recorded during the first quarter of 2017 in connection with Hurricane Matthew; and
| |
• | A decrease in network-related expenses of$6 million or 14.0%, primarily due to network restoration costs incurred in the first quarter of 2017 associated with sustained damages from Hurricane Matthew.
|
VTR. The increase in VTR’s other operating expenses includes an increase of $4 million due to FX. Excluding the effect of FX, VTR’s other operating expenses (exclusive of share-based compensation expenses) increased $3 million or 6.8%. This change is primarily the result of an increase in network-related expenses of $3 million or 21.1% due to higher maintenance costs.
Liberty Puerto Rico. The decrease in Liberty Puerto Rico’s other operating expenses is primarily due to lower various indirect expenses of approximately $2 million, predominantly related to bad debt and franchise fees that decreased as a result of the hurricanes. This decreaserenegotiation and cancellation of certain contracts as well as lower overall spending and (ii) higher utilities costs.
•Facility, provision, franchise and other: The organic increases are primarily due to the net impact of higher (i) utility charges due to rate increases, (ii) rent charges during the six-month comparison, (iii) franchise fees during the three-month comparison associated with revenue growth, and (iv) bad debt provisions as a result of the net negative impact of a provision release in 2021 that was partially offset by higher personnel costsan accrual release during the second quarter of $1 million resulting from hurricane recovery efforts.2022.
General. SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, share-based compensation and other general expenses.
C&W Panama.The following table setstables set forth SG&A by reportable segment and our corporatecategory:
|
| | | | | | | | | | | | | |
| Three months ended March 31, | | Increase |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 117.2 |
| | $ | 114.5 |
| | $ | 2.7 |
| | 2.4 |
VTR | 45.4 |
| | 39.2 |
| | 6.2 |
| | 15.8 |
Liberty Puerto Rico | 12.7 |
| | 12.4 |
| | 0.3 |
| | 2.4 |
Corporate | 11.3 |
| | 5.1 |
| | 6.2 |
| | 121.6 |
Intersegment eliminations | 0.3 |
| | 0.1 |
| | 0.2 |
| | N.M. |
Total SG&A expenses excluding share-based compensation expense | 186.9 |
| | 171.3 |
| | 15.6 |
| | 9.1 |
Share-based compensation expense | 6.4 |
| | 5.1 |
| | 1.3 |
| | 25.5 |
Total | $ | 193.3 |
| | $ | 176.4 |
| | $ | 16.9 |
| | 9.6 |
N.M. — Not Meaningful.
Consolidated. The increase in SG&A expenses during the three months ended March 31, 2018, as compared to the corresponding period in 2017, includes increases of $1 million and $4 million attributable to the impacts of the C&W Carve-out Acquisition and FX, respectively. Our SG&A expenses include share-based compensation expense. For additional information, see the discussion under Share-based compensation expense (includedorganic changes in other operating costs and SG&A expenses) below. Excluding the effects of theexpenses for our C&W Carve-out Acquisition, FXPanama segment for the periods indicated.
| | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Organic increase (decrease) |
| 2022 | | 2021 | |
| in millions |
| | | | | |
Personnel and contract labor | $ | 17.4 | | | $ | 16.9 | | | $ | 0.5 | |
Network-related | 10.3 | | | 10.2 | | | 0.1 | |
Service-related | 3.6 | | | 3.8 | | | (0.2) | |
Commercial | 4.9 | | | 5.0 | | | (0.1) | |
Facility, provision, franchise and other | 12.8 | | | 10.0 | | | 2.8 | |
Share-based compensation expense | 2.1 | | | 0.9 | | | 1.2 | |
Total other operating costs and expenses | $ | 51.1 | | | $ | 46.8 | | | $ | 4.3 | |
| | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Organic increase | | | | |
| 2022 | | 2021 | | | |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 36.3 | | | $ | 34.1 | | | $ | 2.2 | | | | | |
Network-related | 20.2 | | | 20.0 | | | 0.2 | | | | | |
Service-related | 8.2 | | | 7.7 | | | 0.5 | | | | | |
Commercial | 10.8 | | | 10.1 | | | 0.7 | | | | | |
Facility, provision, franchise and other | 23.4 | | | 20.8 | | | 2.6 | | | | | |
Share-based compensation expense | 3.4 | | | 1.6 | | | 1.8 | | | | | |
Total other operating costs and expenses | $ | 102.3 | | | $ | 94.3 | | | $ | 8.0 | | | | | |
•Personnel and share-based compensation expense, our SG&A expenses increased $11contract labor:
million or 6.2%. The organic increase primarily includes increases of $6 million, $3 million and $1 million at Corporate, VTR and C&W, respectively, as further discussed below.
C&W. The increasein C&W’s SG&A expenses includes an increase of $1 million attributable to the impact of the C&W Carve-out Acquisition. Excluding the effect of the C&W Carve-out Acquisition, C&W’s SG&A expenses (exclusive of share-based compensation expense) increased $1 million or 1.2%. This increase includes the following factors:
A decrease in outsourced labor and professional fees of $3 million or 28.6%,are primarily due to higher contractstaff costs in 2017;related to increased sales activities.
An increase in personnel costs of $3 million or 5.0%,•Facility, provision, franchise and other: The organic increases are primarily due todriven by higher incentive compensation costs;bad debt provisions.
Liberty Puerto Rico. The following tables set forth the organic and
A net increase resulting from other individually insignificant non-organic changes in other SG&A expense categories.
VTR. The increase in VTR’s SG&A expenses includes an increase of $4 million due to FX. Excluding the effect of FX, VTR’s SG&A expenses (exclusive of share-based compensation expense) increased $3 million or 6.4%. This change is primarily the result of an increase in sales, marketing and advertising expenses of $3 million or 19.3%, due to higher (i) sales commissions to third-party dealers and (ii) costs associated with advertising campaigns.
Liberty Puerto Rico. Liberty Puerto Rico’s SG&A expenses (exclusive of share-based compensation expense) remained relatively unchanged during the three months ended March 31, 2018, as compared to the corresponding period in 2017.
Corporate. The increase is primarily attributable to added costs associated with being a separate public company, including increases in personneloperating costs and professional services. The increase in costs is inclusive of costs that Liberty Global charges us in connection with certain of the Split-Off Agreements, as further described in note 11 toexpenses for our condensed consolidated financial statements.
Adjusted OIBDA
Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. For the definition of this performance measure and for a reconciliation of total Adjusted OIBDA to our earnings (loss) before income taxes, see note 16 to our condensed consolidated financial statements.
The following table sets forth Adjusted OIBDA by reportable segment and our corporatecategory:
|
| | | | | | | | | | | | | | |
| Three months ended March 31, | | Increase (decrease) |
| 2018 | | 2017 | | $ | | % |
| in millions, except percentages |
| | | | | | | |
C&W | $ | 229.1 |
| | $ | 209.9 |
| | $ | 19.2 |
| | 9.1 |
|
VTR | 105.0 |
| | 91.6 |
| | 13.4 |
| | 14.6 |
|
Liberty Puerto Rico | 18.0 |
| | 51.3 |
| | (33.3 | ) | | (64.9 | ) |
Corporate | (11.3 | ) | | (5.1 | ) | | (6.2 | ) | | 121.6 |
|
Total | $ | 340.8 |
| | $ | 347.7 |
| | $ | (6.9 | ) | | (2.0 | ) |
Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA margins (Adjusted OIBDA divided by revenue) of each of our reportable segments:
|
| | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| % |
| | | |
C&W | 39.1 | | 36.5 |
VTR | 39.8 | | 39.9 |
Liberty Puerto Rico | 29.1 | | 48.1 |
Adjusted OIBDA margin is impacted by organic changes in revenue, programming and other direct costs of services, other operating expenses and SG&A expenses as further discussed above. During the three months ended March 31, 2018, the Adjusted OIBDA of Liberty Puerto Rico was adversely impacted by Hurricanes Irmasegment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Increase (decrease) from: |
| Three months ended June 30, | | Increase (decrease) | | An acquisition | | Organic |
| 2022 | | 2021 | | | |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 38.3 | | | $ | 35.2 | | | $ | 3.1 | | | $ | 0.5 | | | $ | 2.6 | |
Network-related | 10.7 | | | 13.1 | | | (2.4) | | | 0.1 | | | (2.5) | |
Service-related | 13.8 | | | 9.4 | | | 4.4 | | | 0.4 | | | 4.0 | |
Commercial | 12.2 | | | 11.6 | | | 0.6 | | | — | | | 0.6 | |
Facility, provision, franchise and other | 38.7 | | | 37.8 | | | 0.9 | | | 0.8 | | | 0.1 | |
Share-based compensation expense | 1.6 | | | 1.1 | | | 0.5 | | | — | | | 0.5 | |
Total other operating costs and expenses | $ | 115.3 | | | $ | 108.2 | | | $ | 7.1 | | | $ | 1.8 | | | $ | 5.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Increase (decrease) from: |
| Six months ended June 30, | | Increase (decrease) | | An acquisition | | Organic |
| 2022 | | 2021 | | | |
| in millions |
| | | | | | | | | |
Personnel and contract labor | $ | 78.9 | | | $ | 67.6 | | | $ | 11.3 | | | $ | 1.0 | | | $ | 10.3 | |
Network-related | 21.6 | | | 23.9 | | | (2.3) | | | 0.2 | | | (2.5) | |
Service-related | 25.3 | | | 19.8 | | | 5.5 | | | 0.8 | | | 4.7 | |
Commercial | 24.3 | | | 23.6 | | | 0.7 | | | — | | | 0.7 | |
Facility, provision, franchise and other | 82.3 | | | 83.0 | | | (0.7) | | | 1.4 | | | (2.1) | |
Share-based compensation expense | 4.8 | | | 4.1 | | | 0.7 | | | — | | | 0.7 | |
Total other operating costs and expenses | $ | 237.2 | | | $ | 222.0 | | | $ | 15.2 | | | $ | 3.4 | | | $ | 11.8 | |
•Personnel and Maria, as more fully described in Overviewcontract labor: above. With regards to Puerto Rico, Adjusted OIBDA margin during the first quarter of 2018 improved significantly from (71.6)% during the three months ended December 31, 2017 as we recover from Hurricanes Maria and Irma.
Share-based compensation expense (included in other operating and SG&A expenses)
We recognized share-based compensation expense of $7 million and $6 million during the three months ended March 31, 2018 and 2017, respectively.This increase is primarily due to equity awards granted during 2018.
For additional information regarding our share-based compensation, see note 13 to our condensed consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense increased $8 million or 4.3% during the three months ended March 31, 2018, as compared to the corresponding period in 2017. Excluding the effect of FX, depreciation and amortization expense increased $6 million or 3.0% during the three months ended March 31, 2018, as compared to the corresponding period in 2017. This increase isThe organic increases are primarily due to the net effect of (i) higher salaries and other personnel costs, including the impact of higher amortization of deferred commissions in connection with the AT&T Acquisition, and (ii) lower bonus-related expenses.
•Network-related: The organic decreases are primarily due to the termination of the transition services agreement entered into with AT&T associated with network maintenance and licenses. During the six-month comparison, this decrease was partially offset by network-related integration costs associated with the AT&T Acquisition incurred during the first quarter of 2022.
•Service-related: The organic increases are primarily due to higher costs associated with (i) charges allocated from our Corporate operations and (ii) software licenses. Service-related integration costs associated with the AT&T Acquisition remained relatively flat during each of the three- and six-month comparisons, but are expected to grow in future periods.
•Facility, provision, franchise and other: The organic changes are primarily driven by the net effect of (i) decreases in bad debt expense resulting from a lower expected credit loss rates established during the second quarter of 2022, (ii) increases in rent expense driven by purchase accounting adjustments associated with the AT&T Acquisition that were recorded during the second quarter of 2021 and (iii) a decrease resulting from a payment made during the second quarter of 2021 to settle certain 2011 property tax claims.
VTR. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our VTR segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | | Organic |
| in millions |
| | | | | | | | | | |
Personnel and contract labor | $ | 13.2 | | | $ | 16.8 | | | $ | (3.6) | | | $ | (2.4) | | | | $ | (1.2) | |
Network-related | 19.7 | | | 22.5 | | | (2.8) | | | (3.4) | | | | 0.6 | |
Service-related | 9.1 | | | 9.7 | | | (0.6) | | | (1.6) | | | | 1.0 | |
Commercial | 16.9 | | | 22.6 | | | (5.7) | | | (2.9) | | | | (2.8) | |
Facility, provision, franchise and other | 7.7 | | | 9.4 | | | (1.7) | | | (1.6) | | | | (0.1) | |
Share-based compensation expense | 4.2 | | | 2.0 | | | 2.2 | | | (0.7) | | | | 2.9 | |
Total other operating costs and expenses | $ | 70.8 | | | $ | 83.0 | | | $ | (12.2) | | | $ | (12.6) | | | | $ | 0.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Increase (decrease) | | Increase (decrease) from: |
| 2022 | | 2021 | | | FX | | | Organic |
| in millions |
| | | | | | | | | | |
Personnel and contract labor | $ | 27.2 | | | $ | 32.9 | | | $ | (5.7) | | | $ | (4.0) | | | | $ | (1.7) | |
Network-related | 38.2 | | | 43.6 | | | (5.4) | | | (5.6) | | | | 0.2 | |
Service-related | 16.5 | | | 19.8 | | | (3.3) | | | (2.4) | | | | (0.9) | |
Commercial | 39.5 | | | 44.9 | | | (5.4) | | | (5.5) | | | | 0.1 | |
Facility, provision, franchise and other | 15.0 | | | 19.4 | | | (4.4) | | | (2.4) | | | | (2.0) | |
Share-based compensation expense | 7.4 | | | 3.9 | | | 3.5 | | | (1.1) | | | | 4.6 | |
Total other operating costs and expenses | $ | 143.8 | | | $ | 164.5 | | | $ | (20.7) | | | $ | (21.0) | | | | $ | 0.3 | |
•Personnel and contract labor: The organic decreases are primarily due to lower bonus-related expenses.
•Commercial: The organic decreases are due to (i) lower sales commissions and (ii) lower call center activity. The six-month comparison includes (i) higher marketing and advertising costs, primarily related to a commitment to sponsor a music festival that has been postponed during each of the past two years due to COVID-19, offset by (ii) a decrease in sales commissions and (iii) call center activity.
•Facility, provision, franchise and other costs: The organic decreases are primarily due to the net effect of (i) lower operating lease expense as a result of ceasing the amortization of our right of use assets in connection with held for sale accounting of the Chile JV Entities, as further described in note 8 to our condensed consolidated financial statements, and (ii) higher bad debt provisions.
Liberty Costa Rica. The following tables set forth the organic and non-organic changes in other operating costs and expenses for our Liberty Costa Rica segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Increase | | Increase (decrease) from: |
| Three months ended June 30, | | | | | An acquisition | | |
| 2022 | | 2021 | | | FX | | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 6.4 | | | $ | 3.6 | | | $ | 2.8 | | | $ | (0.3) | | | $ | 3.0 | | | $ | 0.1 | |
Network-related | 8.1 | | | 3.1 | | | 5.0 | | | (0.4) | | | 4.7 | | | 0.7 | |
Service-related | 6.0 | | | 1.0 | | | 5.0 | | | (0.3) | | | 3.4 | | | 1.9 | |
Commercial | 13.0 | | | 2.1 | | | 10.9 | | | (0.2) | | | 11.1 | | | — | |
Facility, provision, franchise and other | 11.3 | | | 3.4 | | | 7.9 | | | (0.2) | | | 9.6 | | | (1.5) | |
Share-based compensation expense | 0.5 | | | 0.3 | | | 0.2 | | | — | | | 0.2 | | | — | |
Total other operating costs and expenses | $ | 45.3 | | | $ | 13.5 | | | $ | 31.8 | | | $ | (1.4) | | | $ | 32.0 | | | $ | 1.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Increase | | Increase (decrease) from: |
| Six months ended June 30, | | | | | An acquisition | | |
| 2022 | | 2021 | | | FX | | | Organic |
| in millions |
| | | | | | | | | | | |
Personnel and contract labor | $ | 13.8 | | | $ | 7.0 | | | $ | 6.8 | | | $ | (0.5) | | | $ | 6.8 | | | $ | 0.5 | |
Network-related | 16.8 | | | 6.0 | | | 10.8 | | | (0.6) | | | 10.3 | | | 1.1 | |
Service-related | 11.4 | | | 1.8 | | | 9.6 | | | (0.3) | | | 8.0 | | | 1.9 | |
Commercial | 26.7 | | | 3.9 | | | 22.8 | | | (0.3) | | | 22.7 | | | 0.4 | |
Facility, provision, franchise and other | 27.9 | | | 6.4 | | | 21.5 | | | (0.3) | | | 22.8 | | | (1.0) | |
Share-based compensation expense | 1.4 | | | 0.4 | | | 1.0 | | | — | | | 0.8 | | | 0.2 | |
Total other operating costs and expenses | $ | 98.0 | | | $ | 25.5 | | | $ | 72.5 | | | $ | (2.0) | | | $ | 71.4 | | | $ | 3.1 | |
•Included in the increases from an acquisition in the tables above, are significant integration-related costs associated with the Telefónica Costa Rica Acquisition, which we expect will continue to grow during the remainder of 2022.
Corporate. The following tables set forth the organic changes in other operating costs and expenses for our corporate operations for the periods indicated.
| | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Organic increase (decrease) |
| 2022 | | 2021 | |
| in millions |
| | | | | |
Personnel and contract labor | $ | 7.4 | | | $ | 9.2 | | | $ | (1.8) | |
Service-related | 4.7 | | | 3.7 | | | 1.0 | |
Facility, provision, franchise and other | 6.2 | | | 5.0 | | | 1.2 | |
Share-based compensation expense | 15.4 | | | 19.6 | | | (4.2) | |
Total other operating costs and expenses | $ | 33.7 | | | $ | 37.5 | | | $ | (3.8) | |
| | | | | | | | | | | | | | | | | |
| Six months ended June 30, | | Organic increase (decrease) |
| 2022 | | 2021 | |
| in millions |
| | | | | |
Personnel and contract labor | $ | 16.5 | | | $ | 14.2 | | | $ | 2.3 | |
| | | | | |
Service-related | 8.3 | | | 8.3 | | | — | |
Facility, provision, franchise and other | 12.9 | | | 11.3 | | | 1.6 | |
Share-based compensation expense | 29.8 | | | 30.7 | | | (0.9) | |
Total other operating costs and expenses | $ | 67.5 | | | $ | 64.5 | | | $ | 3.0 | |
•Facility, provision, franchise and other: The organic increases are primarily due to an increase associated within travel.
Results of Operations (below Adjusted OIBDA)
Depreciation and amortization
Our depreciation and amortization expense decreased $28 million or 12% and $57 million or 12% during the three and six months ended June 30, 2022, respectively, as compared to the corresponding periods in 2021,primarily due to the net effect of (i) declines of $55 million and $98 million, respectively, at VTR as we ceased recording depreciation expense during the third quarter of 2021 when we began accounting for the Chile JV Entities as held for sale,(ii) increases at Liberty Costa Rica resulting from the Telefónica Costa Rica Acquisition and (iii) increases in property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives and(ii) a decrease associated with certain assets becoming fully depreciated, primarilymainly at VTR and Liberty Puerto Rico.
Impairment, restructuring and other operating items, net
We recognizedThe details of our impairment, restructuring and other operating items, net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| in millions |
| | | | | | | |
Impairment charges (a) | $ | 556.6 | | | $ | 0.6 | | | $ | 558.5 | | | $ | 2.9 | |
Restructuring charges | 2.9 | | | 13.2 | | | 5.6 | | | 15.0 | |
Other operating items, net (b) | 9.1 | | | 3.2 | | | 12.3 | | | 1.3 | |
Total | $ | 568.6 | | | $ | 17.0 | | | $ | 576.4 | | | $ | 19.2 | |
(a)The 2022 amount primarily consists of $34 milliongoodwill impairment charges associated with certain reporting units within the C&W Caribbean and $13 million during the three months ended March 31, 2018 and 2017, respectively. During 2018, we incurred $26 million of restructuring charges, which include $24 million of employee severance and termination costs related to certain reorganization activities, primarily at C&W. During 2017, we incurred $11 million of restructuring charges, which include $9 million of employee severance and termination costs related to certain reorganization activities, primarily at C&W.
Networks segment. For additional information, regarding our restructuring charges, see note 127 to our condensed consolidated financial statements.
(b)The 2022 amounts primarily includes direct acquisition costs. The 2021 amount includes a gain of disposition of certain B2B operations in our Liberty Puerto Rico segment that was completed in January 2021, which was more than offset by direct acquisition costs.
Interest expense
Our interest expense increased $8$3 million and $7 million during 2018,the three and six months ended June 30, 2022, respectively, as compared to 2017. This increase isthe corresponding periods in 2021. The increases are primarily attributable to the net effect of (i) an increase resulting from the adoption of ASU 2014-09, as further described in notes 2 and 3 to our condensed consolidated financial statements,higher weighted-average interest rates and (ii) a net decrease of accretion expense associated with premiums and discounts.higher average outstanding debt balances.
For additional information regarding our outstanding indebtedness, see note 89 to our condensed consolidated financial statements.
It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 5 to our condensed consolidated financial statements, we use derivative instruments to manage our interest rate risks.
Realized and unrealized gains or losses on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments primarily include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized lossesgains on derivative instruments, net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| in millions |
| | | | | | | |
Cross-currency and interest rate derivative contracts (a) | $ | 276.1 | | | $ | 59.6 | | | $ | 258.5 | | | $ | 179.1 | |
Foreign currency forward contracts | 15.0 | | | 4.0 | | | 6.7 | | | 4.7 | |
Weather Derivatives (b) | (7.8) | | | (6.3) | | | (15.6) | | | (11.6) | |
Total | $ | 283.3 | | | $ | 57.3 | | | $ | 249.6 | | | $ | 172.2 | |
|
| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
| in millions |
| | | |
Cross-currency and interest rate derivative contracts (a) | $ | (38.9 | ) | | $ | (25.5 | ) |
Foreign currency forward contracts | (2.6 | ) | | (1.8 | ) |
Total | $ | (41.5 | ) | | $ | (27.3 | ) |
(a)The gains during the three and six months ended June 30, 2022 and 2021 are primarily attributable to the net effect of (i) changes in interest rates and (ii) changes in FX rates, predominantly due to changes in the value of the Chilean peso relative to the U.S. dollar. These amounts include net losses associated with changes in the credit risk valuation adjustments of $5 million and $9 million during the three months ended June 30, 2022 and 2021, respectively, and $10 million and $30 million during the six months ended June 30, 2022 and 2021, respectively. Included in these amounts are net losses of $3 million and $14 million during the three months ended June 30, 2022 and 2021, respectively, and nil and $17 million during the six months ended June 30, 2022 and 2021, respectively, related to the Chile JV Entities. | |
(a) | The loss during 2018 is attributable to the net effect of (i) losses from changes in FX rates, primarily resulting from an increase in the value of the Chilean peso relative to the U.S. dollar, and (ii) gains resulting from changes in interest rates. In addition, the loss during 2018 includes a net loss of $12 million resulting from changes in our credit risk valuation adjustments. The loss during 2017 is primarily attributable to the net effect of (i) gains resulting from changes in interest rates and (ii) losses from changes in FX rates, primarily resulting from an increase in the value of the Chilean peso relative to the U.S. dollar. In addition, the loss during 2017 includes a net gain of $7 million resulting from changes in our credit risk valuation adjustments. |
(b)Amounts represent the amortization of premiums associated with our Weather Derivatives.
For additional information concerning our derivative instruments, see notes 5 and 6 to our condensed consolidated financial statements and Item 3. QualitativeQuantitative and QuantitativeQualitative Disclosures about Market Risk below.
Foreign currency transaction gains or losses, net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains,losses, net, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| in millions |
| | | | | | | |
U.S. dollar-denominated debt issued by a Chilean peso functional currency entity | $ | (237.4) | | | $ | (27.7) | | | $ | (119.4) | | | $ | (31.8) | |
Intercompany payables and receivables denominated in a currency other than the entity’s functional currency | 2.6 | | | (10.6) | | | 10.7 | | | (26.8) | |
Other (a) | (27.2) | | | (6.1) | | | (56.7) | | | (11.2) | |
Total | $ | (262.0) | | | $ | (44.4) | | | $ | (165.4) | | | $ | (69.8) | |
(a) Primarily includes (i) third-party receivables and payables denominated in a currency other than an entity’s functional currency, (ii) U.S. dollar-denominated debt issued by a CRC functional currency entity and (iii) cash denominated in a currency other than an entity’s functional currency.
Gains or losses associated with (i) changes in the fair values of derivative instruments and (ii) movements in foreign currency exchange rates are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate Adjusted OIBDA to a level that more than offsets the aggregate amount of our (i) share-based compensation expense, (ii) depreciation and amortization, (iii) impairment, restructuring and other operating items, (iv) interest expense, (v) other non-operating expenses and (vi) income tax expenses.
The details of the U.S. dollar equivalent balances of our cash and cash equivalents at March 31, 2018June 30, 2022 are set forth in the following table (in millions):